Capital Gains Tax When Selling Property in Costa Rica

Do You Pay Capital Gains Tax When Selling Property in Costa Rica? A Plain-English FAQ

If you own property in Costa Rica and you are planning to sell, one question usually comes first: will you owe tax on the sale, and how much? The short answer is yes, in many cases – but the real answer is far less intimidating than the phrase “capital gains tax” sounds. Here are the questions our clients ask most, answered in plain English.

Does Costa Rica tax capital gains on real estate?

Yes. Costa Rica taxes the profit you make when you sell real estate. The capital gains tax was introduced by the 2019 tax reform (Ley 9635) and took effect on July 1, 2019. Before that date, property sales were mainly subject to a transfer tax rather than a tax on profit. That means the first thing to check is when you acquired the property. That date decides how your gain is measured.

When does the capital gains tax apply?

The tax generally applies to property acquired on or after July 1, 2019. If you bought after that date, your taxable gain is usually the difference between your sale price and your acquisition cost, adjusted for documented capital improvements.

If you acquired the property before July 1, 2019, transitional rules apply. Those rules can give you more flexibility in how your starting value is set, because you may be able to reference a registered property value rather than your original purchase price. This is where the calculation can change the most, so it pays to get it right before you list.

How is the gain calculated?

Your gain is your net profit on the sale. In broad terms:

• Start with the sale price.
• Subtract your acquisition cost – what you originally paid.
• Subtract documented capital improvements that increased the property’s value.
• Subtract eligible selling costs where they apply.

What is left is generally your taxable gain, and the rate is 15% within the standard regime. The key word is documented. Costs you can prove reduce your tax; costs you cannot prove usually do not.

Who is responsible for withholding and reporting?

Two separate steps usually apply at closing.

First, the notary handling the deed is generally required to withhold a percentage of the transfer value as an advance payment against the capital gains tax. That is settled when you sign, so it is not a bill that arrives months later.

Second, the seller is responsible for reporting the transaction and paying any remaining tax through the annual filing. The withholding is a payment toward your final liability, not always the full amount. Foreign sellers sometimes assume the closing withholds enough and nothing else is required – often there is a further filing step.

How is this different from the transfer tax?

They are two different taxes, and sellers often blur them together. The transfer tax (impuesto de traspaso) applies to the transfer of the property itself, calculated on the transaction value, alongside municipal and stamp charges. The capital gains tax applies to your profit. You can owe both on the same sale, and knowing which is which helps you plan the net proceeds you actually take away.

Which records reduce surprises at sale time?

Good records are the difference between a smooth closing and an expensive one. Before you sell, gather:

• The original purchase documents showing what you paid and when.
• Receipts for capital improvements – construction, additions, major upgrades.
• Records of eligible selling costs.
• The registered property value and any prior valuations.

If your records are incomplete, the transition rules for older properties may still help – but only if you can establish the relevant values. This is exactly where a local advisor earns their fee.

What should foreign owners do before closing?

Treat the tax as part of your sale planning, not an afterthought. Confirm your acquisition date, assemble your records, and understand both the withholding at closing and the reporting that follows. If you are a US or Canadian owner, you may also have obligations at home, and the Costa Rican tax you pay can often be credited against them – with the right documentation.

You do not need to know the terminology before you get in touch. You only need to know what you paid, what you improved, and when you bought. From there, the numbers can be worked out clearly.

The bottom line

Yes, you may owe capital gains tax when you sell property in Costa Rica – but the amount depends on your acquisition date, your documented costs, and the gain itself. Handle it early, keep your records, and the sale stays predictable. Clear guidance. Local understanding.

CostaCifra Tax and Accounting Advisors helps international property owners understand their tax and accounting responsibilities in Costa Rica – in plain English. Request a consultation before you close.